MW Investors are asking if they need to own gold and silver at all
By Naeem Aslam
Precious metals may be done falling - but they're not done being tested
The question, "Are gold and silver oversold?" misses the point.
Post-selloff periods often look confusing. Capital is not rushing back - it is being redistributed.
The sharp selloff in gold (GC00) and silver (SI00) is no longer a liquidation. It is a test.
The violent phase of the selloff appears to have ended. What markets are doing now is probing whether gold and silver still function as hedges - or whether capital should be invested elsewhere.
Weak hands have largely been flushed, but stronger buyers are not yet stepping in aggressively. That tells us the metals market is no longer dominated by forced selling. It's now ruled by hesitation. Instead of asking how far prices can fall, markets are asking a different question: Who still needs to own these assets?
That distinction is critical. Oversold conditions can emerge quickly after liquidation, but support only forms once the investor base changes. This current phase will reveal if that transition is underway.
Also read: Gold and silver rally after a two-session drop: Why the memelike moves are so unusual
Profit-taking money doesn't disappear - it reallocates. When large positions are unwound, the capital does not vanish. It looks for assets that can absorb size without dislocation.
After forced selling, money tends to migrate toward areas with cleaner liquidity, clearer narratives and less recent positioning damage. That does not mean fundamentals elsewhere suddenly improved. It means risk tolerance has shifted.
This is why post-selloff periods often look confusing. Prices stop falling, but they also fail to rebound decisively. Capital is not rushing back - it is being redistributed.
Big tech and growth stocks are candidates, not conclusions
One place capital often tests after liquidation events is in large-cap growth stocks. Not because they are "cheap," but because liquidity remains deep and volatility comparatively contained.
Technology stocks did not experience forced selling last week. The group did not breach internal risk limits. From a flow perspective, that matters.
In an environment where liquidity risk has just been repriced, capital may temporarily prefer assets that can absorb repositioning without sharp price gaps - even if their longer-term risks have not disappeared.
That does not make tech the answer. It makes it a candidate.
Gold and silver may be done falling - but they're not done being tested. The overbought condition in precious metals has been decisively unwound. What has not yet been proven is the presence of a floor.
The question, "Are gold and silver oversold?" misses the point. Oversold conditions describe what has happened. Support describes what happens next.
Gold now needs to demonstrate that nonspeculative demand can stabilize price. Silver, which led the liquidation, will likely continue to lead volatility - either by stabilizing later or by remaining the pressure valve for risk.
Until that dynamic resolves, rallies may struggle to gain traction.
Read: How a single tech heavyweight managed to pull the rug from under gold and global markets
Other metals weren't rejected - they were dragged
Markets will differentiate between assets that suffered structural damage and those that experienced collateral damage.
Palladium (PA00), platinum (PL00), uranium and other industrial and strategic metals were caught in the crossfire of last week's gold and silver liquidation. Their fundamentals did not suddenly deteriorate. They were sold because they sit in the same risk bucket when capital is forced to de-risk.
That distinction matters going forward.
Markets will differentiate between assets that suffered structural damage and those that experienced collateral damage. The recovery path will not be uniform, and leadership - or lack of it - will reveal where confidence is returning first.
The long-term case for gold and silver isn't broken - but isn't enough on its own
The structural arguments for real assets - policy risk, diversification, long-term supply constraints - have not vanished. But in the short run, they are secondary to liquidity and behavior. Conviction does not protect portfolios during forced rebalancing. Liquidity does.
This is why the next phase will be less about narratives and more about observation. Not what prices should do, but how they behave when pressure eases. The key signal from here is not whether gold or silver bounce, but whether volatility compresses. Until it does, confidence will remain tentative.
The selloff in precious metals was not a rejection of their role. It was a stress test. What markets are deciding now is where capital feels safest after the test has already been failed.
Naeem Aslam is chief investment officer at Zaye Capital Markets in London.
More: Gold and silver's $7 trillion wipeout delivers a painful lesson about risk
Also read: 'I'm spooked': Do gold and silver belong in my retirement portfolio after their dramatic fall in value?
-Naeem Aslam
This content was created by MarketWatch, which is operated by Dow Jones & Co. MarketWatch is published independently from Dow Jones Newswires and The Wall Street Journal.
(END) Dow Jones Newswires
February 07, 2026 14:38 ET (19:38 GMT)
Copyright (c) 2026 Dow Jones & Company, Inc.
Comments